It is increasingly difficult to distinguish between today’s package and previously announced packages, including the central government’s rescue package for ten major industries and a variety of local government packages. Nonetheless, the size of the packages appears large enough to spur recovery in the second half of 2009… The more important focus remains medium-term growth. The fiscal packages also do not adequately target new growth drivers, in particular, private consumption and the services sector. This is important as exports and the housing sector are unlikely to repeat their rapid growth of the past decade and will not provide the same spur to GDP growth. –Ben Simpfendorfer, Royal Bank of Scotland

While the headline stimulus package – or investment plan – was unchanged, the strong increase in total fiscal spending (20% year on year), plus its leverage effect, should result in a much larger stimulus than the headline number suggests. We maintain our view that China will achieve 8% growth in 2009 with risk being to the upside. –Mingchun Sun, Nomura

Although no major policy announcements have been made thus far, the budgeted rise in spending on various areas is welcome. The main focus of the government seems to be social stability, which is especially important this year, as it is the 60th anniversary of the People’s Republic of China. … Amid worsening labor market conditions, low-income households have been squeezed. Layoffs and wage reductions hit consumer sentiment in China especially hard because of a weak social support system. Thus, increased government assistance should help to prevent social unrest during this sharp economic downturn. –Sherman Chan, Moody’s Economy.com

We believe that four trillion yuan is only a rough indication of what could be the total investment spending as a result of the multiplier effect of the 1.18 trillion yuan that will be financed by the central government. Based on our discussions with the authorities, we estimate that the multiplier is more than 4. Thus, we have had a view that the final spending is likely to be significantly higher than four trillion yuan, but well below the total of 16 trillion yuan proposed by the local governments. We maintain our projection that the fiscal impulse will add 3.5 percentage points to growth in 2009, but with potential upside. –Wensheng Peng, Barclays Capital

Just because Premier Wen did not utter the exact words “we have a new stimulus package” should not detract from the fact that a significant ramp up in spending and sharp deterioration in the fiscal position is occurring… The overall thrust of the work report recognizes which November policies have been successful, with minimal implementation lag, and has endorsed a deepening of those policies. For instance, the strongest and most immediate reaction to the November stimulus package was the surge in bank lending in December and January. The work report indicates that the government will now target up to 5 trillion yuan of bank lending this year. –Glenn Maguire, Societe Generale

We would continue to highlight the risk of policy complacency. We have argued that, to sustain the current recovery in the Chinese economy, further stimulating domestic consumption and preventing deflation expectation hold the key, as Chinese exports and external demand have yet to see the worst. However, in our view, policymakers appear to be satisfied with the recent initial (yet still quite fragile, in our view) recovery in the economy. As policymakers might wait and watch whether the latest signs of recovery could turn into a more sustainable trend, they might consider the need for further near-term stimulus less imminent. –Frank Gong, J.P. Morgan

The scale of the package confirms the authorities’ commitment to supporting economic growth; further fiscal and monetary policy measures are likely to be undertaken during the course of the downturn. … In terms of the growth outlook, Fitch does not believe that stimulus measures can fully offset the downward momentum that is evident across the economy. Indeed, the agency suggests that China’s economic recovery depends primarily on the timing of the recovery in major trading partners. Fitch projects a 12% decline in exports this year, in the most abrupt contraction of the trade sector since economic reforms began 30 years ago. –Fitch Ratings

Expert Insight

China’s territorial ambitions in the East and South China seas are by now well-documented. Much less understood is one of the key factors in the country’s ability to realize those ambitions: an increasingly well-funded and capable maritime militia.

The U.S. has been urging allies to steer clear of Asia's new China-led infrastructure investment bank. Robert Zoellick, former president of the World Bank, calls that approach mistaken on multiple levels.

Can legal reform and Communist Party control coexist in a way that will benefit Chinese governance and society?This is the question that confronts the country in the wake of its annual legislative gathering.

China's just-concluded legislative sessions seem to be another example of the deinstitutionalization of politics under Xi Jinping. Months from now, these meetings won’t be seen as harbingers of reform, so much as another lost opportunity, writes CRT analyst Russell Moses.

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